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Can Rent-A-Center (RCII) Keep Earnings Streak Alive in Q2?

Zacks Equity Research

Rent-A-Center, Inc. RCII is scheduled to report second-quarter 2019 numbers on Aug 7, after the market closes. Notably, in the trailing four quarters, the company has outperformed the Zacks Consensus Estimate, recording average positive earnings surprise of 73.9%. In the last reported quarter, it surpassed the consensus mark by a wide margin.  Let’s see how the company is positioned ahead of the upcoming quarterly results.

Earnings and Revenue Estimates

The Zacks Consensus Estimate for the second quarter is pegged at 56 cents, suggesting growth of 19.2% from the year-ago period. The consensus mark has remained stable over the past 30 days.

The consensus mark for revenues is pegged at $641.7 million, indicating a decline of 2.2% from the year-ago quarter’s figure.

Rent-A-Center, Inc. Price, Consensus and EPS Surprise

Rent-A-Center, Inc. Price, Consensus and EPS Surprise

Rent-A-Center, Inc. price-consensus-eps-surprise-chart | Rent-A-Center, Inc. Quote

Factors to Consider

Rent-A-Center’s focus on cost containment, improved traffic trends, targeted value proposition and augmentation of cash flow bode well. Also, the company is rationalizing store base and lowering debt load. Further, Rent-A-Center is investing in enhancing omni-channel platform so that customers can experience a seamless approach across channels, markets, retailers, products and brands. It is increasing e-commerce offerings and mobile applications, and leveraging cloud-based point-of-sale platform to manage orders more efficiently, lower losses and cut operating costs. These are likely to have favorable impact on the company’s bottom line in the impending quarter.

Also, the company’s Acceptance Now business model is gaining traction as it enhances consumers’ shopping experience. Management has undertaken initiatives to strengthen the performance of its Core U.S. segment. In an attempt to augment cash flow generation from Core U.S. business, the company is focusing on rates, terms and purchase options that are much more aligned with the customers’ needs. It is also optimizing product mix, increasing the average ticket price, upgrading workforce, concentrating on lowering delinquency rates and rationalizing existing stores.

What Our Model Says

Our proven model shows that Rent-A-Center is likely to beat bottom-line estimates in the second quarter.  For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rent-A-Center’s Earnings ESP of +3.88% combined with its Zacks Rank #3 makes us reasonably confident about an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post earnings beat.

SP Plus Corporation SP has an Earnings ESP of +4.62% and a Zacks Rank #2.

BrightView Holdings, Inc. BV has an Earnings ESP of +0.86% and a Zacks Rank #2.

Weight Watchers International, Inc. WW has an Earnings ESP of +3.68% and a Zacks Rank #3.

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